MIT SEMINAR SERIES IN MANUFACTURING AND
Place: Room 35-225 Time: 12:00 P.M. Tuesday, November 1, 2005
Abraham J. Siegel Professor of Management and Mechanical Engineering
We provide an overview of some operational problems that arise in order
fulfillment in online retailing.
- When a customer orders, an e-retailer assigns
the order to one or more of its warehouses, to minimize its logistics costs,
based on current information. This assignment is necessarily myopic as
it cannot account for future orders or replenishments. We examine the benefits
from periodically re-evaluating these order-assignment decisions. We construct
heuristics to re-assign customer orders to minimize the number of shipments
and test these heuristics on order data from a major e-retailer.
- An e-retailer
needs to decide on how to allocate inventory across its network of order
fulfillment centers. We consider the case for a low-volume SKU and model
the inventory and transportation costs, under the assumptions that the
e-retailer manages the inventory centrally. We discuss how to extend this
analysis to more complex cases.
- For a single order fulfillment center, an e-retailer
will split its storage space into two regions, one for order picking and
the other for reserve storage. We investigate the implied two-stage serial
inventory system where demand is stochastic, and we minimize the total
expected inventory-related costs subject to a space constraint. We report
on tests of the model with data from a major e-retailer.